Milk production on the rise: ABARES

RISING incomes, more people and the ongoing Westernisation of diets will continue to fuel demand for dairy products on a global stage, underpinning prospects for increased production in Australia.

Analysts with the Australian Bureau of Agricultural Resource Economics and Sciences (ABARES) say world dairy prices will average higher this financial year but growth in the volume of exportable supplies after that will see most prices fall marginally.

World supplies are expected to grow faster than demand as major exporting countries, including Australia, expand output.

By 2023 all world dairy prices are projected to be lower in real terms than the 10-year average to 2017.

However, an assumed fall in the Australian dollar in over the next few years will support the competitiveness of Australian exporters and cushion falls in US dollar-denominated prices.

The value of Australian dairy exports is forecast to rise by 8 per cent this financial year, buoyed by strong growth in cheese and whole milk powder.

Over the medium term, increased exports of infant milk formula, skim milk powder, cheese and other value-added dairy products will contribute to that trend.

Overall, ABARES is forecasting an increase in the value of Australian dairy exports to $3.7 billion in real terms by 2023.

That should have some influence on how much milk is turned off.

ABARES is projecting a slight expansion to around 9.3 billion litres this financial year due to rising yields and herd rebuilding.

Relatively favourable farmgate milk prices - expected to lift to an average of 48 cents per litre - are expected to provide an incentive to rebuild herds.

Competition between processors for milk supply is expected to provide support for farmgate milk prices in the medium term, especially in the southern milk region where additional processing capacity is coming online.

Milk production in Australia is expected to move upwards, reaching around 9.8 billion litres by 2023 as producers increase herd sizes and productivity improves.

Higher use of supplementary feeding and more controlled calving is expected to flatten the seasonal milk supply peak. This will increase farm exposure to movements in domestic grain, fodder and water prices.